Plains Exploration & Production Co. (PXP) posted first-quarter earnings of 31 cents per share, below the Zacks Consensus Estimate of 39 cents but above the year-ago profit of 9 cents. The year over year increase was driven by its strong production with lower costs, and effective hedging.
Earnings Trends
Plains reported a negative earnings surprise of nearly 20.51% in the quarter, opposing its historical pattern of outperforming estimates. Historically, the company has delivered a 124.59% positive surprise in the December 2009 and a 145.61% positive surprise in the September 2009. The average earnings surprise over the last four quarters equals a positive 143.31%.
Following the earnings release, over the last 7 days, one analyst out of the 16 raised its 2010 earnings estimates, while 2 analysts revised downward. In the last 30 days, 5 analysts raised their 2010 estimates while 6 pulled back on expectations. For 2011, while none out of the 12 covering analysts raised estimates, 2 slashed expectations in the last seven days. Over the 30-day period, 2 analysts raised their 2011 earnings forecasts, while 6 lowered projections.
The current Zacks Consensus Estimate for 2010 and 2011 EPS is $1.53 and $2.36, respectively.
Following the earnings release, the sentiment for the second quarter of 2010 has also changed with one of the fourteen analysts raising its forecast and two of them cutting down their estimates over the last seven days. In the 30-day period, 2 analysts had raised their second-quarter estimates while 5 cut forecasts. The Zacks Consensus Estimate for the second quarter of 2010 is 36 cents.
Operating Results
Net revenue in the quarter was up 68% from a year ago to $384.1 million, driven primarily by higher commodity prices and higher sales volumes.
Average realized oil and gas prices in the quarter were $67.82 per barrel and $5 per thousand cubic feet (MCF), respectively, up 93% and up 19% from a year ago. Average hydrocarbon prices on a per barrels of oil equivalent (Boe) basis was $50.11, up 60 year over year.
Daily sales volumes for the quarter were 85.1 thousand barrels of oil equivalent (MBOE), up 5% from last year, driven by higher production from Haynesville Shale and increased development in California. Oil represented approximately 53% of the first quarter 2010 daily volumes.
Plains continued to manage its costs effectively in the quarter, with production costs declining 10% to $14.37 per BOE. Cost improvement in the quarter was marked by lower per unit lease operating expense (down 16%), electricity costs (down 13%) and lower production and ad valorem tax costs (down 31%), offset by higher gathering & transportation costs (up 35%).
Financials
Plains’ balance sheet remained strong at quarter-end helped by its conservative financial strategy. The company ended the quarter with nearly $60.7 million of cash and cash equivalents. At quarter-end, net cash provided by operating activities was $221.8 million and operating cash flow was $226.2 million.
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